Contract analysis

I. INTRODUCTION AND QUALIFICATIONS A. Identity and Position Q. Please state your full name, title, and business address. A. My name is Dr. Natasha Orlov. I serve as Director of Rates & Regulatory at Ridgeline Midstream Services LLC ("Ridgeline" or the "Company"). My business address is 700 Kanawha Boulevard East, Suite 1400, Charleston, West Virginia 25301. Q. By whom are you employed? A. I am employed by Ridgeline M

1. The rate design methodology underlying the proposed recourse rate of $0.2265 per dekatherm ("Dth") for firm transportation service on the Ridgeline Pipeline System, consisting of a reservation charge of $0.2223/Dth and a usage charge of $0.0042/Dth, under Rate Schedule FT-1;

2. The justification for the 100% load factor assumption used to derive annual billing determinants of 438,000,000 Dth per year, based upon the Pipeline's design capacity of 1,200,000 Dth per day;

3. The methodology for the split between the reservation charge and the usage charge under the modified fixed-variable ("MFV") rate design, consistent with prevailing FERC policy;

4. The derivation and structure of the proposed interruptible transportation rate under Rate Schedule IT-1;

5. The General Terms and Conditions ("GT&Cs") of the Tariff, which establish the operational, commercial, and administrative framework governing all transportation service on the Ridgeline Pipeline System;

6. The proposed rate schedules, specifically Rate Schedule FT-1 for firm transportation service and Rate Schedule IT-1 for interruptible transportation service;

7. The treatment of interconnection costs in the rate design, specifically with respect to the proposed interconnection with Appalachian Trunk Pipeline Company, LLC ("ATPC") at the Wetzel County Interconnect;

8. A comparison of Ridgeline's proposed recourse rate with the rates of similarly situated FERC-jurisdictional interstate natural gas pipelines in the Appalachian Basin; and

9. A response to anticipated arguments by intervenors regarding load factor, rate level, and the reservation/usage charge split. Q. How does your testimony relate to the testimony of other witnesses in this proceeding? A. My testimony is part of a coordinated presentation of evidence on behalf of Ridgeline. The testimony of the following witnesses provides the factual and analytical foundation upon which the rate des

II. OVERVIEW OF THE RIDGELINE PIPELINE SYSTEM AND SERVICE OFFERINGS A. System Description (Summary) Q. Please provide a summary description of the Ridgeline Pipeline System. A. The Ridgeline Pipeline System is a 187-mile, 24-inch-diameter high-pressure interstate natural gas transportation pipeline extending from the Wetzel County Interconnect in Wetzel County, West Virginia to the Waynesburg Compressor Station in Gr

1. Wetzel Station, located at approximately milepost 2.3 in Wetzel County, West Virginia, with installed compression of 15,000 horsepower ("HP");

2. Mannington Station, located at approximately milepost 78.5 in Marion County, West Virginia, with installed compression of 15,000 HP; and

3. Waynesburg Station, located at approximately milepost 184.2 in Greene County, Pennsylvania, with installed compression of 15,000 HP. The aggregate installed compression for the System is 45,000 HP. The compressor stations utilize natural gas-fired reciprocating compressor units manufactured by Granite Harbor Group/Solar and are designed to maintain system pressures sufficient to achieve the Pipeline's design capac

1. Firm Transportation Service (Rate Schedule FT-1): Firm transportation service is Ridgeline's primary service offering. Under Rate Schedule FT-1, a shipper reserves a specified quantity of transportation capacity on the Pipeline, expressed as a Maximum Daily Quantity ("MDQ") in Dth per day. The firm shipper is obligated to pay a reservation charge for the reserved capacity regardless of whether the shipper actually

2. Interruptible Transportation Service (Rate Schedule IT-1): Interruptible transportation service is available to shippers on a space-available, interruptible basis when firm capacity is not being utilized on the System. IT service does not require a long-term capacity reservation and is subject to curtailment or interruption at any time in favor of firm transportation service. IT shippers pay a daily volumetric rat

III. RATE DESIGN METHODOLOGY A. Overview of Rate Design Approach Q. Please provide an overview of the rate design approach that Ridgeline has adopted for its proposed tariff rates. A. Ridgeline proposes a cost-of-service-based rate design that is consistent with the Commission's traditional ratemaking methodology for interstate natural gas pipelines. Under this approach, the total cost of service — determined in acco

IV. BILLING DETERMINANTS AND LOAD FACTOR ASSUMPTION A. Design Capacity as Billing Determinant Basis Q. Please explain the billing determinant basis used to derive the proposed recourse rate. A. The billing determinants for the proposed recourse rate are based on the design capacity of the Ridgeline Pipeline System. The design capacity of the Pipeline, as confirmed in the testimony of Mr. Greaves, is 1.2 Bcf/d, which

V. RESERVATION AND USAGE RATE DERIVATION A. Reservation Charge Derivation Q. Please explain the derivation of the proposed reservation charge. A. The reservation charge is derived by dividing the total fixed cost of service allocated to the reservation component by the annual billing determinants. As discussed in Section III.B above, the total fixed cost of service allocated to the reservation charge is approximately

VI. INTERRUPTIBLE TRANSPORTATION RATE A. IT Rate Structure Q. Please describe the rate structure for interruptible transportation service under Rate Schedule IT-1. A. Rate Schedule IT-1 provides interruptible transportation service on the Ridgeline Pipeline System. IT service is available when firm capacity is not being utilized on the System, on a space-available, interruptible basis. IT service does not require the

1. Gross IT revenues are calculated based on the volumes transported under Rate Schedule IT-1 during each billing period, multiplied by the applicable IT rate.

2. Variable costs directly attributable to IT service — principally incremental fuel costs and variable O&M — are deducted from gross IT revenues to determine net IT revenues.

3. Net IT revenues are credited in full (100%) to the cost of service, thereby reducing the effective cost of service borne by firm shippers. This approach is consistent with the Commission's policy on IT revenue crediting and the Commission's long-standing interest in ensuring that firm shippers benefit from off-peak capacity utilization. The Commission has recognized that IT revenue crediting provides an incentive